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Given the heightened risks, Jonathan Garner, the chief Asia emerging-market equity strategist for Morgan Stanley, cut targets for the regions “as macro pressure points build materially.” Garner “sees downside from here for all his coverage markets near term,” and speculates that developing economies overall “should” enter a bear market.
Analysts at JPMorgan also have a bearish outlook on the group, arguing it was too soon to add to positions.
“Now that EM equities have been stalling for a while, delivering a negative total return of 520 basis points versus [developed markets]year-to-date, the question is, should one add risk to the group? We still think that this would be premature and stay out of EM equities for now,” Mislav Matejka, the firm’s chief European equity strategist, said in a note. “For EM to rally, we believe we need to see EM [currencies]bouncing and the U.S. dollar resuming its downtrend, but the interest rate differential still appears strongly U.S. dollar positive.”
For more information on the developing economies, visit our emerging markets category.